When the market interest rate is higher than the contractual interest rate bonds will sell at a discount?

When the market rate or interest on bonds is higher than contract rate the bonds

a discount. When the market rate of interest on bonds is higher than the contract rate, the bonds will sell at a discount.

When the market rate is less than the contract rate the bonds will sell at a

If the contract rate is less than the market rate, the bond will sell at an amount less than face (this is known as a discount). If the contract rate is greater than the market rate, the bond will sell at an amount greater than face (this is known as a premium).

When a bond sells at a discount

Key Takeaways. Bond discount is the amount by which the market price of a bond is lower than its principal amount due at maturity. A bond issued at a discount has its market price below the face value, creating a capital appreciation upon maturity since the higher face value is paid when the bond matures.

When the market rate of interest is equal to the contract rate of interest the bonds should sell at

If the market rate is equal to the contract rate, the bonds will sell at face value (i.e., at par). The journal entry to record the issuance of bonds at par. This entry will be made every six months until the bonds mature.

When the market rate of interest is lower than the stated rate of interest bonds will sell at a N

If the market rate is lower than the stated rate when the bonds are sold, the bonds will be sold at a premium. Figure 5.40 illustrates this rule: that bond prices are inversely related to the market interest rate.

When the market rate of interest is less than the contract rate for a bond the bond will sell for a premium

If the contract rate is less than the market rate, the bond will sell at an amount less than face (this is known as a discount). If the contract rate is greater than the market rate, the bond will sell at an amount greater than face (this is known as a premium).

When the market interest rate is greater than the contractual interest rate bonds will sell at a discount

However, if the market interest rate is higher than the contract rate, the bonds are sold at a price below their face value. So if the market rate is 14% and the contract rate is 12%, the bonds are sold at a discount.

What are the contract rate and the market rate for bonds

Assume, for instance, the contract rate for a bond issue is set at 12%.
Bond prices and interest rates.

What factors affect the market rates for bonds

As with any free-market economy, bond prices are affected by supply and demand. Bonds are issued initially at par value, or $100. 1 In the secondary market, a bond's price can fluctuate. The most influential factors that affect a bond's price are yield, prevailing interest rates, and the bond's rating.

Are callable bonds cheaper

Usually, when an investor wants a bond at a higher interest rate, they must pay a bond premium, meaning that they pay more than the face value for the bond. With a callable bond, however, the investor can receive higher interest payments without a bond premium.

When callable bonds are redeemed below the carrying amount

When callable bonds are redeemed below carrying value, loss on redemption of bond is debited.

What is a contract rate

Contract Rate
This is the daily rate of interest payable by the defaulting party in the event of breach of contract or default. It usually refers to the Law Society Interest Rate but can also refer to a rate which is a percentage (such as 4%) above the base rate of a particular high street bank.

Which one of the following bond funds will tend to be the most volatile

Zero-coupon bonds tend to be more volatile, as they do not pay any periodic interest during the life of the bond.

When a corporation issues bonds the price that buyers are willing to pay for the bonds does not depend on which of the following

When a corporation issues bonds, the price that buyers are willing to pay for the bonds does not depend on which of the following? denominations in which the bonds are sold.

When a bond is sold at a premium it is reported on the balance sheet at its

In other words, if the bonds are a long-term liability, both Bonds Payable and Premium on Bonds Payable will be reported on the balance sheet as long-term liabilities. The combination of these two accounts is known as the book value or carrying value of the bonds.

When the effective interest rate method is used the amortization of the bond premium

The effective interest method is used to discount or amortize a bond for accounting purposes. This method accounts for accretion of a bond discount as the balance is moved into interest income or to amortize a bond premium into an interest expense.

What is an indenture bond

An indenture is a legal and binding contract usually associated with bond agreements, real estate, or bankruptcy. An indenture provides detailed information on terms, clauses, and covenants.

When interest rates in the market rise we can expect the price of bonds to _

If market interest rates rise, then the price of the bond with the 2% coupon rate will fall more than that of the bond with the 4% coupon rate. purchase bonds in a low-interest rate environment. A bond's maturity is the specific date in the future at which the face value of the bond will be repaid to the investor.